Ethno-Racial Differences in the Marriage Tax Penalty Among Middle-Income Families with Children

Background and Purpose: Scholars continue to explicate the ways federal tax policies disproportionately privilege White families and disadvantage families of color (Brown, 2021; Curran, 2021; Lipman et al., 2020). The current study explores the racially disparate impact of tax policy, specifically the combination of the joint return with provisions targeting families with children (i.e., Child Tax Credit, EITC) by examining the prevalence, level, and sources of the "marriage tax penalty" among moderate-income married different-gendered couples. A marriage tax penalty occurs when a couple has a higher tax liability if they are married and file a joint tax return than if they were not married and filed separate returns. We build on previous research that illustrates Black married couples are more likely to experience a marriage tax penalty relative to white couples by also exploring differences in the incidence of the penalty among Latine and Asian/Pacific Island (API) couples. We also investigate the potential sources for the differences in the size of the marriage penalty across ethno-racial groups.

Methods: Using the 2019 panel of the American Community Survey, we selected a sample of moderate-income married different-gendered couples with children. We calculated individual and family income and used TAXSIM32 to estimate the couples' tax liability as filed through a joint return and as separate tax returns.. We calculated the percentage of couples that experience a marriage penalty and the mean size of the penalty. We then used a Blinder-Oaxaca decomposition analysis to estimate the contribution of various factors that can directly (i.e., income, number of children) and indirectly (i.e., age, state of residence) impact tax liability. In applying the decomposition, we compared each ethno-racial minority group to white respondents.

Results: Descriptive analyses show that a larger percentage of middle-income Black couples (78%) experience a marriage penalty compared to Latine couples (68%), White couples (66%), and API couples (62%). The mean penalty is also larger among Black couples ($880) compared to Latine couples ($655), White couples ($350), and API couples ($331). Decomposition analysis of Black and White couples explains 64% of the difference between the groups, with the woman’s earnings explaining 25% and the man’s earnings explaining 35% of the difference between the groups. Results of the decomposition analyses of difference in the size of the marriage penalty between Latine and White and API and White suggest various countervailing factors that help widen and narrow the gaps in the penalty. These results also suggest that indirect factors – particularly regional residence differences - may better explain differences in the size of the marriage penalty between Latine and API couples and White couples.

Conclusions and Implications: Critical race scholars argue the joint tax return was established with the White heteropatriarchal nuclear family in mind, helping to produce racialized tax inequity (Alm et al., 2000; Brown, 1996, 2021; Infanti, 2010). Our paper adds to this literature, demonstrating the disparate experience of the marriage penalty among moderate-income Black couples and Latine couples with children. Possible paths for reform that advance racial equity are discussed.